The Credit markets in July topped expectations, pricing $118Bln on projections of $85Bln. YTD, the New Issue calendar has topped expectations for 7 straight months.  The U.S. Treasury market saw 2’s—10’s close inverted by 22 basis points, while 2’s-30’s closed inverted by just 5 basis points. Spreads were unchanged to 10 basis points wider and traded in a 10-35 basis point range.  July saw solid secondary trading activity as lower rates had investors selling credit to buy the new issue calendar once again. Much the like the start of the year when the Fed super-charged risk assets and pushed spreads tighter the Fed meeting and recent inflation data is now signaling the 1^st rate cut potentially in September which has moved U.S. Treasury yields lower and put 2 rate cuts in play to close out 2024.  The month saw a hefty $9.1Bln of Net Client selling continuing the trend of the 1^st half of the year that saw heavy net client selling. The 1^st half of the month of July saw heavy net client selling while U.S. Treasury yields came down modestly but as inflation data and mid-month Fed speak started to signal a change and we saw rates move significantly lower and a slowing into month end of net client selling. The rally in spreads was put on hold for the second straight month and June and July saw wider spreads.

IG Credit spreads in July were unchanged to 10 basis points wider and spreads traded in a 10-35 basis point range. The US Treasury market saw 2yr notes lower by -52 basis points, 10yr notes lower by -45 basis points and the 30yr closed the month -34 basis points lower.  Looking at U.S. Treasury rates in July we saw the month begin with 2’s — 10’s inverted by 29 basis points and 2’s — 30’s inverted by 13 basis points, closing the month with 2’s — 10’s inverted by 22 basis points and 2’s — 30’s inverted by 5 basis points.  As we look at the markets, the Fed held rates steady at the July 31^st meeting and are scheduled to meet again on September 18^th and are hinting at a possible rate cut and continuing to monitor inflation data. The CDX index opened July ’24 at 52.6 and steadily traded lower into July 16^th hitting 48.2 the MTD & YTD low and then spiked to 52.9 on July 25^th before closing the month at 52 on July 31^st.  (Charts Below)  The Bloomberg Barclays US Agg Avg Oas opened July 24’ at .91 and traded lower in a narrow range touching the monthly low of .89 on July 12^th and then steadily traded higher to .94 on July 30^th the MTD high before closing the month at .93 on July 31^st.  The avg spread for the month was .91 The Bloomberg Barclays US Agg Oas began January 23’ at 1.32   (Charts Below)

CDX Investment Grade Index July 2024

CDX Investment Grade Index July 2024

Bloomberg US Agg Corporate Avg OAS 01/01/21—-7/31/24

Bloomberg Barclays US Agg Corporate Avg OAS  01/01/02—07/31/24

IG credit flows in July came in at $691Bln vs trailing months, June $592Bln, May $659Bln, April $757Bln, March $700Bln, February $717Bln, and January $742Bln. The trailing 6-month avg volume is $686billion.  Spreads were unchanged to 10 basis points wider in July, as lower rates and a steady flow of new issues pushed credit wider.  July saw $9.1Bln of net client selling as investors sold credit for the month continuing the trend we saw in January, February, March, May, and June. On the credit curve in July net client selling was seen in 12-30yr paper with $8.3Bln, 7-12yr paper with $3.9Bln and 3-7yr paper with $2.3Bln while 1-3yr and 0-1yr paper saw steady net client buying. Financials, Health Care, Communications and Technology led the charge in net client selling with Utilities, Materials and Energy seeing net client buying. Looking at the markets from a ratings perspective, Baa1/Baa3 paper saw the heaviest net client selling with $4.3Bln and A/A3 saw $3.6Bln . (See IG Credit Flow charts below)

July 2024  IG Credit Flows by Sector

July 2024  IG Credit Maturity Flows

July 2024 IG Credit by Investment Grade Ratings

The month of July saw a steady calendar of new deals that topped expectations and strong secondary trading flows continued with net client selling.  U.S. Treasuries saw a heavy rate move resulting in lower yields along with wider spreads in credit. The U.S. Treasury curve saw 2’s 10’s close inverted by 22 basis points and 2’s 30’s closed inverted by just 5 basis points. We closed July with the Fed holding rates steady at the July 31^st meeting but are signaling we will see a Fed rate cut in September and potentially seeing a total of 2 rate cuts for 2024 if the data continues to cooperate. There was plenty of headlines in July to influence the markets, but you probably could not have predicted the assassination attempt on Former President Trump or the quick transition from re-elect Biden to the sudden transition and move to the current Vice President Harris to now be the Democratic candidate. The geo-political headwinds will be in the headlines for the remainder of the year 2024.   As we begin the month of August, we will get Unemployment data on Friday and upcoming key data reports along with the remainder of 2^nd Qtr earnings releases. The new issue calendar is calling for $95Bln for the month of August  

 

Great job by the Amerivet Securities team in July as we were a Co-Manager on $1.5Bln 2yr tranche for Citibank, $2Bln PerpNC5 for Wells Fargo, $2.25Bln 6NC5 tranche for Morgan Stanley, $750mm 11NC10 deal for Ally Financial, $1.354Bln EETC for United Airlines, $750mm deal for USAA Auto Owner Trust Asset Backed and $1.419Bln deal for Pacific Gas and Electric.  The Amerivet Securities sales team continues to bring in a large volume of differentiated orders from Tier II & Tier III accounts on new issue deals.